Johannesburg - Oil prices gave up the gains of a short rally on Thursday to reach new 13-year lows, which again sent stock markets worldwide in a tailspin.
Asian markets went into reverse as the oil price dropped further with China losing more than 3%, putting new pressure on the JSE. By midday most of the indices on the JSE, which is now at the lowest level in a year, were further down.
The exception was the Resources index, which was unchanged by midday after volatile movements during morning trade with swings of more than 1%.
The tragedy of Thursday mornings’ trade was that the markets showed promise before losing their way again. The MSCI Asia Pacific Index slid 1.6% after rallying as much as 1% from its lowest level since September 2012.
The turnaround was caused by the oil price, as renewed fears about a supply glut and a lack of demand pushed the price of Brent oil to $27.31 per barrel on Thursday morning.
By midday the top indices on the JSE, the All-share and the Top 40 - which both reached new 52-week lows on Wednesday - had lost even more ground to new lows. The All-share index traded 0.44% softer at 46 127 points and the Top 40 index had lost 0.44%.
There is now a distinct possibility that the JSE might soon be in a bear market, as the All-share index is now about 17% lower than the previous high of 55 315 points which was reached in April last year. The official definition of a bear market is one that is 20% lower than its previous high.
The JSE’s demise is in line with world markets, with markets everywhere on the brink of a bear market and two of the world’s most important indices already in a bear market. The MSCI’s index of global equities is now 19.5% below its May record.
On Thursday morning the JSE was pulled down mainly by the Financial index, which lost 1.63% to trade at a new 52-week low of 13 422 points. The index is now about 15% lower than the previous record of 17 911 points. It is affected by the weak rand, which was again volatile on Thursday morning.
At midday the currency was somewhat stronger to the dollar at R16.77; it traded in a wide range between R16.70 and R16.87 in morning trade.
Renewed rumours that Barclays is considering disinvesting from Africa also contributed to negative sentiment in the sector. Although there has been no official comment from Barclays, such reports surfaced again in US media this week. Barclays holds the majority of its interests in Africa through Barclays Africa Group [JSE:BGA], which traded 2.39% lower at R123.4 at midday. Barclays Africa lost more than 25% of its value over the past 90 days.
Sanlam [JSE:SLM] lost 2.66% to R52.42 and Old Mutual [JSE:OML] was 1.08% down. FirstRand [JSE:FSR] was the busiest bank share and traded 1.54% weaker at R38.99.
The Industrial index was only 0.33% lower, supported by European markets which tried to stabilise after reaching the lowest point in three years on Wednesday.
Among the big dual-listed shares, Naspers [JSE:NPN] traded 0.63% lower at R1 767.86 and British American Tobacco [JSE:BTI] lost 1.25% to R839.37. Richemont [JSE:CFR] was only 0.05% softer at R103.68.
SABMiller [JSE:SAB] started the day positively to reach a new high of R985.95, but was then dragged down by negative sentiment. By midday the share was 0.72% softer at R973.92 despite news that the brewer, which is in the process of being bought by Anheuser-Busch InBev, reported quarterly sales which beat estimates, with growth being driven by demand in Latin America and Africa.
The two biggest commodity shares on the JSE, BHP Billiton [JSE:BIL] and Anglo American [JSE:AGL], gave up most of their early morning gains. At midday BHP Billiton was still 2.85% higher at R142.00, but the share traded as high as R148.58 in earlier transactions. Anglo American was at one stage more than 7% higher at R57.62, but lost all its gains and traded 0.75% softer at R52.90.